TADC Employment Law Newsletter — Fall 2006

TADC EMPLOYMENT LAW NEWSLETTER

Fall 2006

R. Edward Perkins, Editor

Ben Connally, Assistant Editor

Tamara Ruen, Assistant Editor

Sheehy Serpe & Ware, P.C. — Houston, TX

INTRODUCTION

This newsletter summarizes and analyzes the most significant cases impacting the employment law practice since the Spring of 2006. While it is not a comprehensive digest of every case involving employment law during this period or of every holding in the cases discussed, we hope that you find the update both interesting and useful. The TADC Employment Law Newsletter is published twice a year and is written and edited by Sheehy, Serpe & Ware, P.C. shareholder Ed Perkins. Mr. Perkins specializes in the trial of employment law cases. (This newsletter was originally published by the Texas Association for Defense Counsel in October 2006).

I. Texas Supreme Court Decisions

A. At-Will DoctrineSabine Pilot clarification

In Ed Rachal Foundation v. D'Unger, 49 Tex. Sup. Ct. J. 537 (Tex. 2006), Claude D'Unger, an officer and director of a charitable organization that owned a ranch along the Rio Grande, worried that Ed DuBose, the ranch foreman, had harassed migrants who had crossed the river from Mexico. D'Unger alerted the organization's Chief Executive Officer, who allegedly told him not to report DuBose to law enforcement officials. D'Unger later saw a ranch report of an incident in which DuBose apprehended three Mexican nationals, handcuffed them, and turned them over to Border Patrol. When D'Unger asked other Border Patrol agents about it, they denied knowledge of it. D'Unger subsequently informed many different government officials, as well as the Mexican Consulate, of the incident. The organization suspended D'Unger and then fired him when he refused to resign.

D'Unger filed suit for breach of contract, wrongful termination, and, against the CEO individually, for tortious interference. Shortly thereafter, the Border Patrol produced records describing the incident: DuBose safely delivered the migrants the day he apprehended them. Despite these records, a Nueces County jury found for D'Unger, and the court awarded him over $550,000 in lost wages and attorneys' fees.

The court of appeals unanimously reversed the award for the breach of contract and tortious interference claims, but upheld the wrongful termination claim. Both parties petitioned for review: D'Unger challenged the reversal of his breach of contract claim and the Foundation challenged the wrongful termination award.

The Supreme Court reversed and rendered that D'Unger take nothing. In a per curiam opinion, the Court evaluated D'Unger's argument that the narrow exception to at-will employment, created in Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex. 1985) applied to his case. That decision holds it is unlawful to terminate an employee solely because he or she refused to perform an illegal act. The Court found no evidence of a crime D'Unger refused to perform. The Court further explained, "Sabine Pilot protects employees who are asked to commit a crime, not those who are asked not to report one." (emphasis in original). In its analysis, the Court mentioned that failure to report a crime is not itself a crime, and that D'Unger could not identify a law that criminalized his silence. In fact, the Court noted, this point was irrelevant because no crime occurred.

Finally, the Court refused to adopt a corollary to Sabine Pilot to protect employees who contact law enforcement agencies to determine whether they have been asked to do something illegal. In refusing to adopt this corollary, the Court noted that D'Unger only wanted to determine whether another's actions were illegal, not whether his silence might be illegal. The Court did not reach the issue of whether this corollary correctly stated Texas law because D'Unger would not have fallen within it anyway.

II. Texas appellate Court Decisions

A. At-Will Doctrine – Agreement to Transfer Employment is Not a Separate, Enforceable Agreement from the Employment Relationship Itself.

In Talford v. Columbia Medical Center at Lancaster Subsidiary, L.P., 198 S.W.3d 462 (Tex. App. – Dallas, 2006), a dispute arose over whether an employee was offered permanent employment. Ms. Talford worked for Columbia Medical System in Conroe, Texas. She responded to a newspaper advertisement for a pharmacy tech at the Lancaster Subsidiary (CML). She claims that CML's Human Resources recruiter offered her the position. As part of that offer, she is alleged to have said that she was hiring Ms. Talford "permanently" and "for the rest of her working career" provided that she would transfer from the Conroe to the Lancaster location.

Talford accepted the position, completed the form requesting the transfer, and arrived for orientation one week before her scheduled start date. However, when she came for orientation, she was told that CML was still interviewing for the pharmacy tech position. Ultimately, someone else was selected, and Ms. Talford was told that she had never been hired.

She filed a breach of contract claim, asserting that the agreement to transfer her for "permanent" employment "for the rest of her working career" was an unequivocal indication by CML to be bound not to terminate her except under clearly specified circumstances. She acknowledged that her employment in Conroe was at-will, and that her employment at Lancaster, had it commenced, would also have been at-will. However, she argued that the agreement to transfer her employment was not at-will, because of the promise of continued employment "for the rest of her working career." She attempted to distinguish between the agreement to commence employment and the employment itself.

The court, however, found this argument to be without merit. For the purposes of at-will employment, there is no distinction between termination before the date of employment and termination after work has begun. Because the statute of frauds applies to invalidate any oral agreement of permanent employment that she may have had, she cannot enforce an agreement to commence that employment. Therefore, the Court of Appeals affirmed the District Court's grant of summary judgment in favor of CML.

B. Workers' Compensation – No Evidence of a "Negative Attitude" to Support a Retaliation Claim When Offered a Light-Duty, Lower-Paying Position.

In Green v. Lowe's Home Centers, Inc., ___ S.W.3d ____, 2006 WL 2044260 (Tex. App. – Houston [1st Dist.], 2006), a former employee of Lowe's Home Center's alleged wrongful termination in retaliation for filing a workers' compensation claim.

Mr. Green was in appliance sales for Lowe's when he was injured by a falling refrigerator. Lowe's paid for his medical bills, granted him paid medical leave, and evidence even suggested that Lowe's filed for workers' compensation on Green's behalf.

His doctor released him to return to work, but with some physical work restrictions. In light of those restrictions, Lowe's asked him to consider accepting a position as a greeter, at a 37% lower salary. Alternatively, he was given the option of returning to his pre-injury job in appliance sales, but another person would have to do all physical work. Green opted to return to his previous job, and was never asked to do any physical work that violated his doctor's orders.

Approximately two months later, Green was terminated following a sexual harassment investigation that revealed some inappropriate behavior. He alleged that the sexual harassment was a mere pretense, and that he had been terminated in retaliation for his workers' comp claim. The trial court granted a no-evidence summary judgment in favor of Lowe's, and Green appealed.

In order to sustain a cause of action for retaliation, an employee must establish a causal link between the termination and the workers' compensation claim. One way of doing this is by evidence of a negative attitude toward the employee's physical condition. Green argued that this "negative attitude" was evidenced by Lowe's offer of a lower-paying position upon his return from medical leave.

However, the Court of Appeals found that these facts, in the light most favorable to Green, did not create a fact issue regarding a negative attitude by Lowe's. Texas law does not necessarily ascribe a "negative attitude" to a reduction in pay following an injury, and in this case, Green's pay was not even reduced, because he did not accept the lower-paying position. In light of the fact that Lowe's was able to demonstrate factual bases for the sexual harassment claim against Green and that they presented evidence that they were actually supportive of Green during his injury, the Court found that Green had not created a fact issue sufficient to survive summary judgment on his claim.

C. Texas Labor Code – A "Substantial Change of Condition" Not Required to Introduce New Evidence of an Alternative Date of Maximum Medical Improvement on Judicial Review.

American Casualty v. Hill, 194 S.W. 3d 162 (Tex. App. – Dallas, 2006) involves a dispute over workers' compensation benefits. Mr. Hill was injured while working on a forklift. His physician reported that he reached maximum medical improvement on November 6, 2002 and assigned him an impairment rating of 5%. Hill challenged both findings at a contested case hearing and at an administrative appeal, but the findings were left intact.

Hill then filed suit seeking judicial review of the administrative determinations. At trial, he introduced a new report from the same physician stating that he reached maximum medical improvement on June 30, 2004. At the request of American Casualty, the trial court entered a finding of fact that there had not been a substantial change in Mr. Hill's condition between November 6, 2002 and June 30, 2004. The trial court held that the date of maximum medical improvement was June 30, 2004.

American Casualty appealed, claiming that the doctor's report Hill relied on at trial was considered improperly because evidence that is not presented at the contested case hearing is inadmissible upon judicial review absent a substantial change in condition. In making that argument, American Casualty relied on Tex. Lab. Code § 410.306(c) which states: "[e]xcept as provided by Section 410.307, evidence of extent of impairment shall be limited to that presented to the division." Tex. Lab. Code § 410.307(a) provides that "[e]vidence of the extent of impairment is not limited to that presented to the division if the court, after a hearing, finds that there is a substantial change of condition."

The Court of Appeals, however, found that these statutes do not apply to Mr. Hill's case. "Certification of maximum medical improvement and assignment of the impairment rating involve different determinations and are treated differently under the statutes." Because Mr. Hill was using the new evidence to contest the date of maximum medical improvement, rather than the 5% impairment rating, the new evidence was admissible on judicial review. The Court of Appeals affirmed the trial court.

D. Employment Decisions of a Religious Institution – A Director of Youth Ministries is a "Ministerial Position" for Purposes of Subject Matter Jurisdiction.

In Patton v. Jones, ___S.W.3d ___, 2006 WL 2082974 (Tex. App. – Austin, 2006), Oak Hill United Methodist Church made a decision to terminate the employment of their Director of Youth Ministries following rumors of his dating certain church members and the use of pornography. Mr. Patton sued the church for defamation and tortious interference with an employment contract, but the trial court dismissed the case for want of subject matter jurisdiction. Patton appeals.

The Free Exercise Clause has been applied to destroy subject matter jurisdiction when the dispute is ecclesiastical in character, concerning theological controversy, church discipline, or the standards of morals required of church members. Watson v. Jones, 80 U.S. 679 (1872). This has become known as the ecclesiastical-abstention doctrine and when a claim challenges a religious institution's employment decision, the question becomes whether the employee held a "ministerial" function. If the employee was a member of the clergy or otherwise "ministerial," the courts lack subject matter jurisdiction to review the employment decisions.

Here, the question of whether a Director of Youth Ministries performs a ministerial function is a novel one. The Court of Appeals looked to Patton's primary duties to determine whether his position was "ministerial." He is not a member of the clergy, is not an ordained minister, does not participate in worship ceremonies, was not responsible for the music or liturgy, and was not required to teach any religious classes or have any religious training.

However, the Court found that his responsibilities were "ministerial" in nature such as to deprive the courts of subject matter jurisdiction. He was responsible for organizing youth retreats, the purpose of which is to bring people together in fellowship, furthering the church's mission. He managed the budget of the youth program, which gave him the power to make decisions which strongly affected the spiritual leadership of the youth by deciding in what activities they would participate. He performed fundraising and recruiting duties, which the court found a very important function to the "spiritual and pastoral mission of the church." Because the Court of Appeals found the duties of a Director of Youth Ministries to be "ministerial," Patton's case was properly dismissed for lack of subject matter jurisdiction under the Fourteenth Amendment.

III. Fifth circuit Court Decisions

A. Uniformed Services Employment and Reemployment Rights Act – Contracts to Arbitrate

In Garrett v. Circuit City Stores, Inc., 449 F.3d 672 (5th Cir. 2006), Michael Garrett worked for Circuit City while also serving as a Marine Corps Reservist. After he began working there, he acknowledged, in writing, his receipt of information regarding Circuit City's Associate Issue Resolution Program, which included rules and procedures for arbitration and an arbitration opt-out form. Garrett did not opt out of arbitration within the opt-out policy's 30-day time period.

Several years later, as the American military began preparing for combat in Iraq, Circuit City allegedly began criticizing and disciplining Garrett without justification. Circuit City fired Garrett in March 2003, which he attributes solely to his military status. Garrett filed suit; the district court agreed that the Uniformed Services Employment and Reemployment Rights Act (USERRA) barred enforcement of the arbitration agreement.

The Fifth Circuit reversed and remanded. Garrett argued that § 4302(b) of USERRA precluded binding arbitration. The Court disagreed, noting that Congress did not clearly express its intent concerning the arbitration of servicemembers' disputes in that section. The Court also examined §§ 4323 and 4324. While § 4323(b)(3) states, "the district courts of the United States shall have jurisdiction of the action" against a private employer, it outlines provisions for private and state employees. Section 4324 addresses (in part) procedures for federal government employees, including adjudicating claims in the Merit Systems Protection Board, an administrative tribunal. The Court focused on this fact and reasoned that this option evidenced Congress' intent to allow other means of dispute resolution. Thus USERRA does not require adjudication in a federal judicial forum.

Garrett further argued that arbitration conflicted with USERRA's underlying structure and purposes. The Court disagreed because Garrett failed to show that Circuit City's arbitration rules would not allow him a fair opportunity to present his claims. On this point, the Court further noted that it is improper to infer that arbitration proceedings do not adequately protect a servicemember's rights.

B. Family and Medical Leave Act – Clarification of Arbaugh

In Minard v. ITC Deltacom Communications, Inc., 447 F.3d 352 (5th Cir. 2006), Melissa Minard requested leave under the Family Medical Leave Act (FMLA) for treatment of a serious medical condition. ITC provided her with a written memorandum granting her requesting. The memorandum also specifically stated that she was an "eligible employee" under the FMLA with a right to up to 12 weeks of unpaid leave in a 12-month period.

After Minard's leave period started, and after she had surgery, ITC discovered she was not an eligible employee because ITC employed less than 50 people within 75 miles of her worksite. The day she returned to work, ITC fired her. Minard filed suit under the FMLA and amended her complaint to allege equitable estoppel regarding her status as an eligible employee. She argued that she relied to her detriment on ITC's representation that she was an eligible employee.

ITC moved for summary judgment on the ground that the district court did not have subject matter jurisdiction because it employed less than 50 people within 75 miles of Minard's worksite. Minard responded with evidence attempting to show that ITC had more than 50 employees in that area and alternatively that she relied to her detriment on ITC's representation that she was an eligible employee under the FMLA. The district court granted ITC's motion for summary judgment.

On appeal, the Fifth Circuit focused on the Supreme Court's ruling in Arbaugh v. Y & H Corporation, d/b/a The Moonlight Café, 126 S. Ct. 1235 (2006). There, the Supreme Court held that, "[w]hen Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as non-jurisdictional in character." Subsequently, another circuit court followed Arbaugh when it held that Title VII's employee-numerosity requirement is an element of a plaintiff's claim rather than a jurisdictional limitation because the numerosity requirement comes from the "definitions" section of the statute. Faulkner v. Woods Transportation, Inc., 174 Fed. Appx. 525, 2006 WL 869709 (11th Cir. 2006).

Applying the Supreme Court's bright line rule, the Fifth Circuit concluded that the threshold number of employees bringing an employer within the FMLA is an element of a plaintiff's claim and not a jurisdictional requirement. The Court further concluded that ITC unintentionally made a definite misrepresentation to Minard. Despite this conclusion, ITC argued that Minard did not rely on its misrepresentation to her detriment because she would have had the surgery anyway. The Court held that the parties had a genuine dispute as to material issues of fact, and thus reversed and remanded the case.

C. Family and Medical leave Act – Employee Must Provide Employer with Information to Get FMLA Leave

In Mauder v. Metropolitan Transit Authority of Harris County, 446 F.3d 574 (5th Cir. 2006), Kenneth Mauder answered phones and provided technical support via telephone for the Harris County Metropolitan Transit Authority (MTA). In 2002, Mauder's new supervisor, Watkins, e-mailed him to tell him he needed to be more visible and implemented a system-wide schedule of breaks and attendance policies. Later that year, Mauder missed two weeks of work for medical treatment and was diagnosed with Type II diabetes. His return-to-work notice did not reflect any medical restrictions.

The next month, Mauder's doctor prescribed him with a drug that caused temporary uncontrollable bowel movements and diarrhea. Over the next few months, Watkins continued to e-mail Mauder because he was away from his workstation, even after he produced doctor's notes reflecting his condition. The doctor's notes also mentioned that the side effects of the medication usually were temporary. Watkins also denied Mauder's requests for a flexible break schedule. Despite the denials, Mauder continued to be tardy and unavailable.

On September 12, Watkins put Mauder on a 30-day "probation," which required him to meet certain goals by October 11 or he would be fired. On September 25, October 1, and October 8, Watkins wrote memos noting Mauder's lack of improvement. On October 4, Mauder requested FMLA leave and received a packet with instructions to return it by October 19. Watkins fired him on October 11; Mauder filed suit alleging the MTA fired him for exercising his rights under the FMLA. The district court granted the MTA's motion for summary judgment.

In affirming the district court's decision, the Fifth Circuit focused first on the fact that Mauder did not show that his condition left him incapacitated, as the statute requires. Prior FMLA diarrhea cases involved employees who could not work at all. While Mauder's diabetes is a chronic serious health condition, it did not render him incapacitated.

The Court further held that Mauder did not meet any of the three conditions defining a "serious health condition": he was not absent from work for more than three consecutive days; he was not incapacitated due to pregnancy or prenatal care; and he did not receive treatment for incapacity due to a chronic serious medical condition. Further, Mauder did not provide MTA with the information it needed to have to process his demands for flexible bathroom breaks. The Court noted that the FMLA requires cooperation between employee and employer.

Finally, the Court held that MTA did not retaliate against Mauder because he knew MTA could terminate him if his performance did not improve. The record showed he received several reprimands for his attitude and availability. When these did not improve, MTA fired him.

D. Family and Medical leave Act – "De Minimis" Change Does Not Give Rise to FMLA Liability

In Smith v. East Baton Rouge Parish School Board, 453 F.3d 650 (5th Cir. 2006), Phyllis Smith took maternity leave under the FMLA from her position as assistant supervisor of school accounts for the Baton Rouge Parish School Board. While she was on maternity leave, the board reorganized the accounts department and altered Smith's job requirements. Instead of traveling to various schools, Smith would work from the board's central office. Smith sued the board for violating the FMLA. The district court granted the board's motion for summary judgment.

In affirming, the Fifth Circuit noted that Smith's salary did not change, and Smith admitted that the job title and description was similar to that of her former position. The only difference was the requirement that she work from the central office. The Court held that such "de minimis, intangible differences do not give rise to FMLA liability."

Author: R. Edward Perkins
Phone: (713) 951-1004
Fax: (713) 951-1199
Website: sswpc.com